Magnolia Oil & Gas Corporation (MGY) 2018 Q3 Earnings Conference Call Transcript

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Magnolia Oil & Gas Corporation (NYSE: MGY)
Q3 2018 Earnings Conference Call
Nov. 13, 2018, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, good morning and thank you for participating in Magnolia Oil and Gas Corporation’s Third Quarter 2018 Earnings Conference Call. My name is Adam, and I will be your moderator for today’s call.

At this time, all participants will be placed in a listen-only mode as our call is being recorded. I would now like to turn the program over to Mr. Brian Corales, Investor Relations, for prepared remarks, which will be followed by a brief question and answer session.

Thank you, Mr. Corales. You may begin.

Brian Corales — Vice President, Investor Relations

Thank you, Adam, and good morning, everyone. Welcome to Magnolia Oil and Gas’ Third Quarter 2018 Earnings and inaugural conference call. Participating on the call today are Steve Chazen, Magnolia’s Chairman, President, and Chief Executive Officer, and Chris Stavros, Executive Vice President and Chief Financial Officer.

As a reminder, today’s conference call contains certain projections and other forward-looking statements within the meaning of the Federal Securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements.

Additional information on risk factors that could cause results to differ is available in the company’s proxy statement filed with the SEC. A full safe harbor can be found on Slide 2 of the conference call slide presentation, with the supplemental data on our website. You can download Magnolia’s Third Quarter 2018 earnings press release, as well as the conference call slides from the investor section of the company’s website at www.magnoliaoilgas.com.

I will now turn the call over to Mr. Steve Chazen.

Stephen ChazenChairman of the Board, President, Chief Executive Officer

Thank you. Now, it seems like just yesterday I ended my 63rd earnings call at OXY. Given my current age, it’s unlikely that I’ll be able to do 63 here.

So, on my remarks, I’ll refer to both GAAP and pro forma financial information. Chris will discuss this in more detail, but for reference, the pro forma information includes the results of the Karnes assets, Giddings assets, and the subsequent GulfTex assets that were acquired by EnerVest on March 1st, 2018 for all periods presented, and excludes transaction costs. Literally, the financial statements to read are fairly complicated and the most useful, I think, is to talk about the pro forma.

When we originally set out to create a publicly traded independent E&P company, which is now Magnolia, we did so with the understanding it had to be investable within an energy sector that has generally struggled to perform both absolutely and relative to the S&P 500 over the last decade. Our business model was designed to be differentiated, and with the primary objective to generate stock market value over the long-term. Our strategy was to establish a company’s characteristics would demonstrate a certain basic set of criteria that would appeal to generalist investors, who are more accustomed to an industrial model.

There are several basic elements to our business model, and we’re off to a good start so far, as we’ve exceeded in the delivery of our objectives. We’ve summarized this on Slide 4 of the presentation slides. We expect to generate real GAAP net income and growing earnings per share over time. Magnolia’s pro forma net income for the third quarter of 2018 was approximately $58 million and $151 million in the first 9 months of this year. One of our goals is to generate high operating in full cycle margins.

As you can see on Slide 8, we generated pre-tax operating margins of 23% on a GAAP basis and more than 41% on adjusted basis during the period that Magnolia owned the assets in the third quarter of 2018. We planned to spend within 60% of our annual EBITDAX, or gross cash flow generation, on drilling and completing wells, and in order to achieve moderate production growth of 10% to 15% a year. We had originally said this level of spending was expected to deliver approximately 6,000 Boe per day of annual organic production growth for the company.

As our organic production growth is well ahead of our expectations this year, we’re in the midst of recalibrating our outlook for 2019 and we’ll have more to say about that production as we move forward into next year. In any event, this level of spending and growth is expected to result in meaningful free cash flow generation.

For the 9 months ending September of this year, $285 million of capital was spent on drilling and completing wells, which represented 50% of our pro forma EBITDAX for that period, shown on Slide 9. Our third quarter 2018 pro forma production approximately of 55,200 Boe a day exceeded our previous guidance and provided year-over-year organic production growth of 59%. Bear in mind that much of this growth was achieved during a period when we were only running one rig in our Karnes County assets.

Our strategy is to maintain a very strong balance sheet with a low amount of leverage. We have approximately $400 million of long-term debt at the end of the third quarter, which is less than a half return of our annualized pro forma EBITDAX for the most recent quarter. We have an undrawn revolving credit facility of $550 million at the end of the quarter. As part of our plan, we expected approximately 40% of our annual gross cash flow to be free cash flow or undesignated, and beyond our needs required to achieve our moderate annual production growth targets. The free cash flow will be used for creative acquisitions, share repurchases, and debt reduction.

During the third quarter, we announced the acquisition of substantially all of south Texas assets of Harvest Oil & Gas Corporation for $133 million in cash and 4.2 million Magnolia shares. The assets produced approximately 4800 barrels a day during the first half of 2018 and added approximately 114,000 net acres to our Giddings Field position, and 15 net undrilled locations to our core Karnes County inventory. The transaction closed at the end of August. We continue to evaluate several small to medium-sized bolt-on acquisition opportunities that fit our business plan, have similar financial and operating characteristics as Magnolia’s existing assets.

During the third quarter 2018, we operated 3 drilling rigs across our acreage, with two rigs in Karnes County and one rig in the Giddings Field, with a plan to continue this level of activity for the remainder of the year. Our third quarter production partially benefited from a step by the non-operated related activity. Our production in Giddings saw a sequential quarterly increase of 3800 Boe a day to 13,800 Boe per day in the third quarter. There was resolved the completion of several new wells during the period, plus one month of production from the Harvest acquisition. We expect to see further growth and production in Giddings for the fourth quarter as a result of additional well completions.

Looking into next year, we expect to add a second rig in Giddings in the first quarter of 2019 to appraise and delineate the opportunities within our large net acreage position. All-in-all we’re off to a terrific start and are very pleased with what our assets have delivered so far. Our 2018 development plan continues to exceed our original expectations while generating significant free cash flow after capital. Our pro forma EBITDAX of $575 million for the year-to-date is earning at a base that is well ahead of what we had forecast when we announced the original transaction with EnerVest back in March.

As we look forward into 2019, we are very optimistic regarding our prospect of opportunities, which should allow us to continue to deliver on our business model objectives and help enhance Magnolia’s stock market value.

I will now turn the call over to Chris Stavros, who will review our third quarter financial items and operating highlights in greater detail, and also provide some guidance for the fourth quarter. Chris?

Christopher Stavros — Executive Vice President & Chief Financial Officer

Thank you, Steve, and good morning everyone. Before I walk through some of the numbers I’d like to talk for a moment about the corporate structure and financial reporting implications that you may notice as a result of the business combination.

As a result of the closing of the transaction with EnerVest in the third quarter, US GAAP requires us to present the financial statements of the period prior to the acquisition, which include the results of only the Karnes County assets as the predecessor, while the financial statements on or after July 31st include the results of both the Karnes County and the Giddings Field assets and one month of the results of the Harvest acquisition, which we refer to as “successor.”

We were also required to allocate the fair market value of the acquisitions to our individual assets, including oil and gas properties based on their estimated fair values. As a result, the financial statements on or after July 31st lack comparability with those prior to that date. We recognize that this required presentation format may make it difficult to compare the predecessor-successor periods, so wherever possible we will try to provide additional context between the two periods in order to try and help you understand the underlying financial and operational trends of the business.

We will also sometimes refer to pro forma information, which includes the results of both the Karnes and the Giddings assets, as if they had been combined as of January 1st, 2017. As Steve noted, the pro forma results also include the results of the GulfTex acquisition that occurred on March 1st, 2018 as if it had been included in all periods presented, but exclude any non-recurring items such as transaction costs.

Additionally, it’s important to note that Magnolia has adopted enough C structure in order to preserve certain tax benefits to both Magnolia and the sellers of the Karnes County assets. The consequence to this structure is two Classes of shares, A and B, which have equal voting rights.

This also means that we report a non-controlling interest line for the shared income associated with the Class B shares. The important thing is that, from an investor standpoint, the up-C structure is generally neutral with the exception of taxes, and in the current period’s earnings for Magnolia, the one-time transactions cost of $22.4 million that were incurred in connection with the business combination.

Our Class B shares associated with the non-controlling interests are not included in the diluted share count because they would be anti-diluted. We reported an average diluted share count of approximately 157 million shares in the third quarter, which includes the dilutive effect of warrants of 5.1 million shares. However, for EPS modeling purposes, you should use our full net income including the non-controlling interest and our combined total of Class A and Class B shares outstanding, as well as the dilutive effect of warrants during those periods of solidly positive income.

Looking ahead to the fourth quarter, we met the third and final traunch of our Karnes County earn-out consideration, so we expect the Class A and Class B share counts to be approximately 250 million shares outstanding, which is reflected on the face of our 10-Q that will be filed later today.

Moving on to the numbers, Magnolia reported net income of $6.7 million on a GAAP basis or $0.04 per diluted share for the 2-month successor period ending on September 30th. Net income, including the non-controlling interest, was $25.5 million for the 2-month successor period.

Earnings for the successor period were affected by a number of non-recurring one-time cash charges, including $22.4 million of transaction costs related to the business combination, $11 million associated with a seismic license purchase, and a $6.7 million loss associated with a payment made to EnerVest as an early settlement of a liability in lieu of a $47 million contingent earn-out payment based on certain net revenue thresholds that were payable in 2021.

Revenues totaled approximately $178.6 million for the 2-month successor period, and $267.7 million on a pro forma basis for the third quarter of 2018. The company’s average realized oil price was $70.79 per barrel for the successor period or $72.55 on a pro forma basis for the third quarter. Overall revenue benefited from strong relative price realizations as our oil realizations are indexed to LOS waterborne prices, and as such, our realizations were 105% of WTI during the third quarter.

Turning to the cost side, unit costs for the quarter highlight our field efficiencies. For the purposes of modeling the company, we would recommend using the per-Boe cost metrics shown in slide 8 of the conference call slides for the successor period, and as these costs are representative of the current basis of accounting for the assets.

LOE came in at $3.14 per Boe for the successor period and $3.46 per Boe on a pro forma basis for the third quarter of 2018, and lower than expected as a result of the Harvest acquisition, as well as new wells, brought online in the third quarter. EDNA costs were $19.25 per Boe for the successor period and reflects Magnolia’s plan to focus on near-term development of PUD reserves.

Exploration expense was $11.2 million in the successor period. This reflects a one-time purchase of a seismic license for $11 million. In the future, we would expect that our exploration expense to be lower as our operations are largely focused on development.

G&A expenses of $10.3 million, or $2.94 per Boe during the 2-month successor period, were higher than normal, and due to additional G&A costs related to acquisition and professional service fees. We would expect our per-unit G&A cost to gradually fall over time as some of these fees subside and as our production continues to grow. The effective tax rate for the successor period was approximately 12%. We expect our effective tax rate to remain in the range of approximately 13% to 15% due to the accounting treatment of the non-controlling interest.

At the close of the business combination which formed Magnolia, we had $115 million of cash on hand. On a pro forma basis adjusted EBITDAX, as shown on slide 9, was approximately $216 million for the third quarter ended September 30th, and $575 million for the 9-month period of 2018.

Capital spent on drilling and completing wells was $112 million during the third quarter, and well within our objective of spending within 50% to 60% of cash flow. The cash consideration for the Harvest acquisition was $133 million, and we spent another $2 million on other lease-held acquisitions and $11 million on the seismic license during the third quarter.

We paid EnerVest $26 million in cash during the quarter as an early settlement for an earn-out obligation. We ended the third quarter with $37 million of cash inclusive of the outlays I just mentioned. We ended the period with $388 million of long-term debt on the balance sheet and our revolving credit facility was undrawn with a capacity of $550 million. A summary balance sheet can be seen on slide 10.

As we noted in a press release, we increased our production guidance for the full year to 53,000 Boe per day from 50,000 Boe per day previously, due to better than expected results from our drilling program in the third quarter, the completion of the Harvest acquisition, as well as higher non-operated activity.

Turning to guidance for the remainder of the year, we expect our total production to grow sequentially an average of approximately 59,000 Boe during the fourth quarter. The improvement is primarily due to additional wells expected to be turned in line during the quarter, and also partly due to a full period of capture from the Harvest acquisition.

Giddings is expected to see solid sequential growth with expected fourth quarter production of 17,000 Boe per day as additional wells are completed and turned in line. We continue to expect that our total capital will be in a range of 50% to 55% of our full-year 2018 EBITDAX and in line with our earlier guidance. We expect to drill and complete approximately 60 net wells through our asset base during 2018.

Looking into 2019, we expect that our capital spending will be in a range of 50% to 60% of our total EBITDAX for the year and in line with our business model. We currently plan to run a total of 4 rigs next year, continuing with 2 rigs in Karnes and, as Steve mentioned, adding a second rig in Giddings early in the year and in an effort to further appraise our large net acreage position.

Product price changes at current prices affect our earnings before income and taxes by roughly $12 million on an annualized basis for every dollar per barrel change in oil prices, and $3 million on an annualized basis for every $0.10 per MCF change in natural gas prices.

We’re now ready to take your questions.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, we will now be conducting our Q&A session. If you would like to ask a question, please push *1 on your telephone keypad now. A confirmation tone will indicate your line is in the question queue.

You may push *2 if you would like to remove your question from the queue. And for any participant using speaker equipment, it may be necessary to pick up your handset before pushing the * key. One moment while we poll for questions.

Our first question comes from the line of Neal Dingmann from SunTrust. You are now live.

Neal Dingmann — SunTrust Robinson Humphrey (STRH) — Analyst

Morning, guys. Congratulations on a great first quarter. Steve, for you or Chris, my question is really just when you add that second rig, or maybe talk about both the rigs in the Giddings Field to talk about where you believe the focus will be there, at least initially, to start off next year.

Stephen ChazenChairman, President, Chief Executive Officer

With the second rig, especially, we’ll be looking at different areas, not necessarily where we’ve drilled so far to try to see what might be there. Probably some in the south, and then some, probably, in our northeast, northwest corner of it right now. As the results come in, that rig isn’t in a development mode, and so we’ll probably move that around as the year progresses.

We’re still really in early days of this, and I think the planning should be viewed as flexible for next year.

Neal Dingmann — SunTrust Robinson Humphrey (STRH) — Analyst

Okay. And then just lastly, anything you could add just — I know you guys have just been great on bolt-on acquisitions — on timing behind these and anything in this size, potentially. Thank you so much.

Stephen ChazenChairman of the Board, President, Chief Executive Officer

Well we look at a lot of stuff, so — and we expect there’ll be some in this quarter probably fairly small, but we don’t — we’re not interested in large public deals. So, and they are not very many large private deals, either. So, I would expect there will be some modest growth from that in the fourth quarter, and maybe more in the first quarter.

You know, this volatility that we’re currently enjoying or experiencing, however you want to describe it, probably makes more acquisitions likely as people get more nervous. And to some extent, we’re set up to respond to that.

Neal Dingmann — SunTrust Robinson Humphrey (STRH) — Analyst

Very good. Thanks so much, Steve.

Operator

Thank you. Our next question comes from the line of Jeffrey Campbell from Tuohy Brothers. You are now live.

Jeffrey Campbell — Tuohy Brothers — Analyst

Good morning and congratulations on your first call. Can you disclose…

Stephen ChazenChairman, President, Chief Executive Officer

You always, you know, you always remember that you only have one chance to make a good first impression, so…

Jeffrey Campbell — Tuohy Brothers — Analyst

Yeah, well your record precedes itself. Can you disclose how much you’re getting as average work and interest increased due to the Harvest acquisition?

Stephen ChazenChairman, President, Chief Executive Officer

I think it’s about 15% –15 percentage points.

Jeffrey Campbell — Tuohy Brothers — Analyst

Thank you. And it was mentioned that you’re going to add a rig in Giddings first quarter of next year. Will Giddings still be a self-funding program with a 2-rig program?

Stephen ChazenChairman, President, Chief Executive Officer

Yes.

Jeffrey Campbell — Tuohy Brothers — Analyst

Okay. And if I could ask…

Stephen ChazenChairman, President, Chief Executive Officer

But it probably won’t be a 50%, 60%. It will probably be closer to 100%, you know, so we’ll probably use all the cash flow to work Giddings and Karnes will probably continue at sort of around 50%, I would guess.

Jeffrey Campbell — Tuohy Brothers — Analyst

Okay. And if I could ask one last one because I didn’t see it in the presentation, are you currently hedging any production?

Stephen ChazenChairman, President, Chief Executive Officer

No.

Jeffrey Campbell — Tuohy Brothers — Analyst

And what’s your approach to hedging going forward?

Stephen ChazenChairman, President, Chief Executive Officer

Well, if we had to, we would buy insurance, but that’s the only reason we would hedge. You know, my track record of brick and oil and gas prices is pretty crummy. And I could prove that to you if I had to, so the idea is that you hedge when you need to. You need to protect your capital program or you need to predict your balance sheet, and we’re designed to do that.

I assume the good folks who sell hedging products actually make money on it, so I’m really not in the business of enriching Goldman-Sachs.

Jeffrey Campbell — Tuohy Brothers — Analyst

Okay, great. Thank you and congratulations, again, on the quarter.

Operator

Thank you. Our next question comes from the line of Irene Haas from Imperial Capital. You are now live.

Irene Haas — Imperial Capital LLC — Analyst

Yeah, hi. I was noticing that your NGL pricing was quite strong this quarter. Could you give us a little color on that? Should we expect the same trend next quarter? Then, secondarily, how is your in-house staffing coming along because you still probably have that service contract with the EnerVest team. And when would you bring in a COO?

Stephen ChazenChairman, President, Chief Executive Officer

Well, we actually hired an operating executive. I think it was announced in the Times — Steve Millican. So, we hired an operating executive last, a few weeks ago, and we filed because he’s a reporting person. So, he was at EnerVest. He ran their south, the stuff we bought, essentially.

So, we have an operating person and we’re in no hurry at all. Right now, the EnerVest people are doing a great job for us at a reasonable cost. And there’s no real reason to change that unless it changes. As far as the NGL pricing goes, NGL pricing has been strong and there’s no reason to think it would, you know, it’s going to change for this quarter. It’s been running pretty good as a percentage of WTI. Probably its percentage is up as the WTI price seems to want to decline a buck a barrel a day.

Irene Haas — Imperial Capital LLC — Analyst

Right. And, also, gas price is looking pretty good, so you guys should be positioned to enjoy that, as well?

Stephen ChazenChairman, President, Chief Executive Officer

Yeah. You know, we produce about 80 million a day, roughly, in gas. So, a dollar — we’ve had a dollar change, basically. So, it’s $80 thousand a day so, roughly speaking, I think that’s not so bad.

Irene Haas — Imperial Capital LLC — Analyst

Okay, great.

Stephen ChazenChairman, President, Chief Executive Officer

Thank you. Thank you, Irene.

Operator

Thank you. Our next question comes from the line of Jeff Grampp from Northland Capital Markets. You are now live.

Jeff Grampp — Northland Capital Investments — Analyst

Morning, guys. Sticking over on Giddings, can you guys maybe touch a little bit on how maybe some of the recent wells that you’ve recently completed, how those have been performing? And maybe how some of the longer-term performance has been from the first few batch of wells that you guys announced earlier this year?

Stephen ChazenChairman, President, Chief Executive Officer

I think when we started this, we said that one of our goals was not to provide a lot of detail, because there’s still open acreage and so we’ll file when we have to. But, generally speaking, the wells have been performing in line with the ones we disclosed in the offering. So, they’ve been — and, you know, there’s been some small decline, but clearly a lot of these wells are, you know, we’ve got a well making a thousand barrels a day of oil. It’s been making it for 6 months. So, I mean, it’s pretty good but it’s not perfect.

Obviously, there’s things that some are a little better than others, but we haven’t drilled any really bad wells but, given enough time and enough wells, I’m sure we will. So, we’ll file when we have to and you’ll be able to see the wells as we file. But generally speaking, you know, we’ve been pleasantly surprised.

Jeff Grampp — Northland Capital Investments — Analyst

All right, that’s fair. I appreciate that, Stephen. And I’m curious, as you guys look into ’19 here with the added rig in Giddings, do you guys need a frack crew that would support each of the activities in each operating area? Or would you look to keep the one crew and bounce it back and forth in ’19? Or is that kind of…

Stephen ChazenChairman, President, Chief Executive Officer

We’ll probably keep the single crew unless we pick up some — you know, the Giddings because the other well’s going to be drilled in sort of one-off wells rather than development wells. It’s going to be a little slower than you might have in a development mode. And so, we ought to be able to make do with a single crew.

It makes the production a little lumpier than we might like because all of a sudden, it’s going along, you think you know what’s — and all of a sudden you turn on some wells and you get a big run-up. But if you’re watching quarterly numbers you’re probably, you know, it may be a little confusing.

Jeff Grampp — Northland Capital Investments — Analyst

Okay. That’s helpful. I appreciate that. And then, the last one for me, we’ve seen a couple non-energy specs lately do some tender offers on some warrants and was just curious if you guys have given that any consideration? Obviously, generating a lot of free cash and that’s kind of roundabout way of a buyback, which you kind of reference earlier. So, I was just kind of curious to get your all’s thoughts on some sort of transactional thing related to the warrants.

Stephen ChazenChairman, President, Chief Executive Officer

You know, we view the warrants as having exceptional value. So, I think that’s probably all we can say about it.

Jeff Grampp — Northland Capital Investments — Analyst

All right. Fair enough, appreciate the time, guys.

Stephen ChazenChairman, President, Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Michael McAllister from MUFG Securities. You are now live.

Michael McAllister — MUFG Securities — Analyst

Thank you very much. Welcome back to all.

Stephen ChazenChairman, President, Chief Executive Officer

I don’t know about that. I’m thinking about how I’m going to get out of this in the future.

Michael McAllister — MUFG Securities — Analyst

Ooh, a leading question.

Stephen ChazenChairman, President, Chief Executive Officer

I’m sorry. Go ahead.

Michael McAllister — MUFG Securities — Analyst

What was, if you could, what was Harvest’s production at the close of the deal at 8%?

Stephen ChazenChairman, President, Chief Executive Officer

About the same as it is now. The same as what we said. It was heavily toward the Giddings –you know, the production was almost entirely Giddings, I think. And you can see where the Giddings production is, so it’s about what we said for the beginning when it closed. It’ll mirror, pretty close, the growth that’s in our outlook for Giddings. Maybe a little better, on average because some of the locations are better.

Michael McAllister — MUFG Securities — Analyst

Okay. And with the thought of getting bigger, what about going outside of the two core areas in acquisitions?

Stephen ChazenChairman, President, Chief Executive Officer

Well, I think what will be said to that question over time is it has to fit the business model. So, 50%, 60% of the cash flow to grow the business 10% to 15% a year — high operating margins of 40% to 50% EBIT margins. It would take a — so, that implies a high-quality reservoir and it would take a considerable reduction in purchase price to make that work because I count purchase price as part of the EBIT calculation.

A lot of people ignore the purchase price because it’s a non-cash charge that DD&A once was cash, but now it’s non-cash. So, I think we’re just cautious about going out. If we could find exceptional value, we’d consider that but, you know, we spent a year looking for that and didn’t find it, so I think there might be something but it’s probably not imminent.

Michael McAllister — MUFG Securities — Analyst

Okay. That’s all I had. Thank you very much.

Stephen ChazenChairman, President, Chief Executive Officer

Thank you.

Operator

Thank you. Ladies and gentlemen, once again, if you’d like to ask a question please push *1 on your telephone keypad now.

Our next question comes from the line of Joe Evans from SG Capital. You are now live.

Jonathan Evans — SG Capital Management — Analyst

Hi, it’s Jon Evans. I was just curious.

Stephen ChazenChairman, President, Chief Executive Officer

The guy on the thing doesn’t work for us, you know.

Jonathan Evans — SG Capital Management — Analyst

Yeah, no, no, no. I was just letting him know. Just from the standpoint, you’re building this kind of unique company from a generalist standpoint, and I guess I was hoping maybe you could help me understand how you guys go about thinking of spending the extra EBITDA that you have relative to dividends or stock buybacks, as opposed to just buying more oil and gas properties, etc. A lot of industrial companies obviously do that over time and I’m curious to understand your guys’ thought process toward that.

Stephen ChazenChairman, President, Chief Executive Officer

Okay. So, the oil and gas — if you can buy oil and gas properties that fit the business model — that is to say, you earn good EBIT that doesn’t dilute it. Good EBIT and you can generate an aggregate growth out of it, you know, 10% to 15% organic growth with under 60% of the cash, then that’s a non-dilutive acquisition and we’d go do that.

If you get a — you know, eventually, you would think there’ll be more happiness in the oil industry and the opportunity to do that goes away. And so, once we can’t do that anymore then we’ll turn our attention to either dividends or share repurchases or bold — we don’t plan to –there’s not hardly any float anyways, so you wouldn’t want to go on the open market now to buy any shares.

Jonathan Evans — SG Capital Management — Analyst

Okay.

Stephen ChazenChairman, President, Chief Executive Officer

And so, obviously, EnerVest has shares but I’m not sure they’re sellers at current prices. So, I think it’s just a matter where the value would be at the time. The bias if it’s neutral — that is between share repurchases and dividends — my bias has historically been for dividends. Easier to count.

Jonathan Evans — SG Capital Management — Analyst

Okay. And just a follow-up question. With this tumultuous slide that we’ve seen in crude, do you think that gives you better opportunity as you go into next year to make some more of these accretive bolt-on acquisitions?

Stephen ChazenChairman, President, Chief Executive Officer

I hope so.

Jonathan Evans — SG Capital Management — Analyst

Okay.

Stephen ChazenChairman, President, Chief Executive Officer

You know, it’s the old line about whenever everyone is frightened, we’re greedy and when everyone is complacent, we doze off. So, generally speaking, in a buoyant environment where everybody’s all happy, probably less opportunities, for sure. In a more volatile environment, people get more frightened and we’ve set the company up so we don’t have to be frightened.

Jonathan Evans — SG Capital Management — Analyst

Great. Thank you for your time.

Stephen ChazenChairman, President, Chief Executive Officer

Sure. Thank you.

Operator

Thank you. Ladies and gentlemen, we have no further questions in queue at this time. I’d like to turn the phone over to management for closing.

Stephen ChazenChairman, President, Chief Executive Officer

Thank you. We’re done.

Jeff Grampp — Northland Capital Investments — Analyst

Thank you. Appreciate you all’s time today.

Operator

Thank you, ladies and gentlemen. This does conclude our teleconference for today. You may now disconnect your line at this time. Thank you for your participation and have a wonderful day.

Duration: 36 minutes

Call participants:

Brian Corales — Vice President, Investor Relations

Stephen ChazenChairman, President, Chief Executive Officer

Christopher Stavros — Executive Vice President & Chief Financial Officer

Neal Dingmann — SunTrust Robinson Humphrey (STRH) — Analyst

Jeffrey Campbell — Tuohy Brothers — Analyst

Irene Haas — Imperial Capital LLC — Analyst

Jeff Grampp –Northland Capital Investments — Analyst

Michael McAllister — MUFG Securities — Analyst

Jonathan Evans — SG Capital Management — Analyst

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10 stocks we like better than Walmart
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, the Motley Fool Stock Advisor, has tripled the market.* 

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now… and Walmart wasn’t one of them! That’s right — they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of August 6, 2018
The author(s) may have a position in any stocks mentioned.

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